The International Finance Corporation, the World Bank
affiliate charged with investing in private enterprise, broke new
ground last month when it provided a partial guarantee for 10-year
rupee-denominated bonds issued by Ballarpur Industries (BILT) of
New Delhi, India. The Rs1.5 billion ($32 million) private placement
was a milestone of sorts in efforts by the Washington-based lender
to ramp up a guarantee programme that it had seldom used before.
The IFC had never used a guarantee to enhance the credit quality of
local-currency-denominated bonds.
The BILT bonds carry a coupon of 11.7%, yielding 120 basis points
over 10-year government securities. The deal found acceptance with
investors that had expected it to pay about 100bp more, after the
IFC spent time presenting a theoretical evaluation. The issue was
oversubscribed by one-third. DSP Merrill Lynch served as sole
adviser and lead arranger for the issue. The cost of the IFC
guarantee was not disclosed. ...
